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HomeNews & ViewsBusiness FocusBangladesh RMG Export Experience: Prospects and Challenges in the Indian Market

Bangladesh RMG Export Experience: Prospects and Challenges in the Indian Market

The export of Bangladesh’s readymade garments (RMG) to India has seen significant growth in recent years. From July to December of the 2021-2022 fiscal year, RMG exports to India reached $365.9 million, a 58% increase compared to the previous fiscal year. This growth is driven by the expansion of middle-class buyers and increasing brand consciousness among Indian customers. International brands opening showrooms in India also contribute to this positive trend, presenting good prospects for Bangladeshi RMG products.

Bangladesh RMG Export

In the 2018-2019 fiscal year, RMG exports to India were valued at $490 million, rising to $840 million over the last two fiscal years. Since India granted duty-free entry to all Bangladeshi goods except arms and narcotics in 2011, the total export value reached $1.25 billion in 2018-2019. During the first six months of the current fiscal year, Bangladeshi exports to India totaled $1.06 billion, with RMG products making up 34% of this figure.

A report by McKinsey & Company in 2019 projected that India would become a $590 billion market for readymade garments by 2022. BGMEA Director Mahmud Hasan mentioned that global brands now prefer India over Singapore, Hong Kong, and South Korea for opening showrooms, which benefits Bangladeshi RMG exporters. Additionally, AHM Ahsan, Vice Chairman of the Export Promotion Bureau, expressed optimism that RMG exports to India will continue to grow as the Bangladesh government enhances export destinations globally.

However, despite these positive trends, Bangladesh faces significant challenges in exporting to India, primarily related to payment issues. This has led to a reluctance among many Bangladeshi exporters to pursue the Indian market aggressively.

Key Challenges with Indian Exports:

  1. Payment Issues: Both Bangladeshi and Indian businesses frequently face payment issues, highlighting the need for secure business policies to ensure timely payments.
  2. Banking and Documentation: India’s current practices at landports and warehouse facilities can complicate the export process, making it difficult to proceed with bank-to-bank documentation for payments.
  3. Discount Practices: Some Indian retailers exploit discount practices, affecting the profitability of Bangladeshi exporters.

In 2013, Lilliput Kidswear, a Delhi-based kids’ retailer, faced a $4 million default in payments to about 22 small Bangladeshi garment exporters. These suppliers had provided clothing worth $5 million to Lilliput Kidswear, but the company failed to make timely payments. This non-payment strained trade relations between India and Bangladesh, as it sent a negative signal to Bangladeshi exporters. While the Indian government declined direct intervention, efforts were made to resolve the issue through mediation and partial repayments.

From 1998 to 2021, I faced these challenges and more, including dealing with various Indian retailers and online platforms in Bangladesh, leading me to stop working with them.

Current Trends: In the 2023-2024 fiscal year, Bangladesh’s export business to India has seen a noticeable decrease. Many Bangladeshi exporters are not interested in continuing exports to India due to the persistent payment issues and associated risks. This reluctance highlights the need for more secure and reliable trade policies to facilitate smoother transactions and maintain healthy trade relations.

Additionally, India’s domestic manufacturing has increased significantly after COVID-19. Local retailers are now mostly buying from their local manufacturers. Indian export-oriented factories have also increased their capacity to fulfil domestic demand. Recently, India aims to boost its apparel exports by 2030 significantly. While there are varying targets, the Indian Apparel Export Promotion Council (AEPC) has set a goal of reaching $40 billion in apparel exports by that year.

Moving Forward: It’s important to note that India’s RMG export market isn’t very significant for us. It might be more beneficial to consider it as a market for leftover and stock goods. Connecting with EC and USA retail shops in India is a better strategy.

Lastly, SAFTA- is promising but ineffective. After 2026, this may also come to an end due to the expiration of LDC benefits.

Let’s focus on building stronger trade relations where our efforts are truly valued and appreciated.

Author: Md. Salauddin, Director, Reaz Garments Ltd., Head of Operations, Bunon

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